U.S. consumer prices continued to firm in February, indicating inflation is creeping up toward the Federal Reserve's target without the kind of breakout that would warrant a faster pace of interest-rate hikes.


Both the main consumer price index and the core gauge, which excludes food and energy, rose 0.2% from January, matching the median estimates of economists, a Labor Department report showed Tuesday. The CPI was up 2.2% in the 12 months through February, compared with 2.1% in January, while the core index increased 1.8% from a year earlier for a third month.

The data indicate inflation is gradually picking up without any big acceleration. That's in line with policy makers' outlook for price gains steadily approaching their goal and officials' projection for three interest-rate hikes this year, including one anticipated at the Fed's meeting next week.

The lack of an upside surprise on the CPI figures may help calm a market that remains on edge after data released in February showed wages and prices rising faster than anticipated, leading investors to sell stocks on concern the Fed would raise interest rates more aggressively.

Fed officials target 2% annual inflation based on a separate index, the Commerce Department's gauge linked to consumer spending. Price increases have largely remained below that goal in recent years.

The increase in the core index brought the three-month annualized gain to 3.1%, following a 2.9% reading in January.

Auto prices restrained inflation, as the cost of new vehicles fell 0.5% in February, the most since 2009, while used cars and trucks were down 0.3%, breaking a four-month streak of gains. Wireless-phone services, which constrained inflation last year, fell 0.5%.

The core gauge rose less than in the prior month despite apparel costs, which helped drive the outsize gain in January, advancing 1.5% in February following a 1.7% increase. Hospital services, another component watched by analysts, fell 0.5%.

The CPI is the broadest of three price gauges from the Labor Department because it includes all goods and services. About 60% of the index covers the prices that consumers pay for services ranging from medical visits to airline fares, movie tickets and rents.

Bloomberg News